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The Evolution of Retailing: A Meta Review of the Literature

Abstract The evolution of retailing has interested academics across a range of disciplines including economics, history, geography, and marketing. Due to its interdisciplinary appeal, the corpus of knowledge on retailing is composed of many disparate variables of analysis - from transaction costs, and entrepreneurs, to environmental factors, and the dispersion of stores. In consequence, the literature that attempts to explain retailing evolution presents as a patchwork, and extant theories remain disconnected because of their narrowness of focus. This literature review applies a macro and systems theory approach to the multi-discipline literature, and links together bodies of work that, until now, have remained conceptually unconnected. This provides a meta typology of six factors that could explain change in retailing: economic efficiencies; cyclical patterns; power inequities; innovative behaviour; environmental influences; and interdependent parts of the system in co-evolution.

Keywords: retailing institutions; literature review; history of marketing thought; marketing

history, systems theory.

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Introduction

In the long input-output chain involving the production and distribution of consumer goods to

persons and households, retailers are the terminal members in the value chain. Retail stores

provide the arena in which the final economic transaction takes place, and consumption begins.

That is, retailing represents the inflection point at which costs are converted into revenues, and

the exchange behaviour that underpins marketing occurs, and its development has been of

continuing interest to social science researchers. Yet the impact of retailing on marketing has

been largely ignored, setting aside the work of a few notable scholars, particularly Stanley

Hollander.

The neglect of the role of retailers reflects a wider neglect of the study of marketing

channel formats in general (Quinn and Murray 2005; Williams 2009). Classical economic theory

dominated business thinking for at least the first half of the twentieth century and its assumption

of “costless” transactions meant that “until recently many economists produced institution-free

models and were proud of the irrelevance of institutions for their theories… (Economics)

assumed that institutions were a ‘free factor’ or, in other words, that organizing economic

activity was not costly” (Landesmann and Pagano 1994, p. 199). The services of retailers are not,

of course, cost-free. Retailers bear the risks of forward purchase, later payment, and uncertain

demand. As described by the functionalist writers, retailers solve problems of coordination in

providing the canonical utilities of time, place, and product assortment which, for consumers (the

ultimate purchasers of goods and services), means the ability to buy products when, where and in

whatever combination we wish - without recourse to the original producers.

Despite the importance of retailers in marketing, the growth of knowledge on retailing

change has been slow - proceeding in discrete bits - with the exceptions of the writings of

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Chandler (1977), and Hollander (for example, 1960, 1964, 1967, 1972-1973, 1978, 1980, 1981,

1986a, 1986b), and significant contributions from Dixon (1963, 1994, 2001), Fullerton (1986),

Savitt (1989), and Tedlow (1990). The slow pace of knowledge development is explained in

large part by the ahistorical nature of most research in marketing. As Dixon (1982) argues, in

denying history, and therefore our intellectual heritage, marketing scholars have tended to

redevelop - rather than develop further - concepts that already exist. The main concepts that

constituted a channel of distribution, for example, had been present in the literature for centuries,

but it was not until the nineteenth century that Shaw first listed them in a “slow and painstaking”

working out of ideas (Dixon 1982).

Since the arrival of department stores in the mid 1800s, retailing has undergone

significant change in five main areas: formats, technologies, forms of ownership, customer types,

and geography (Chandler 1977). In Western countries, the most visible change has been the

transition of stores through a sequence of different formats. In approximate chronological order

of their development, the main retailing formats have been small general stores, department

stores, chain stores, supermarkets, discount department stores (such as Walmart), franchises,

category killers or superstores, and e-retailing. This sequence is imprecise, however, because

precursors for each format type existed prior to their mainstream arrival, and as other researchers

argue, the pace of change is a process in which at any one time, “there are likely to be

participants at a variety of stages of the cycle” (Dawson 1979, p. 351). Different country settings

produced different dates of emergence, and there is a difference between individual and global

chronologies.

While several theories have been put forward to explain this progression, the

development of a global model has proved “elusive” (Filser and McLaughlin 1989). Each of the

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extant approaches has made valuable contributions to our understanding, but all are limited by

their narrowness of view (Brown 1987, Levy et al. 2005). Explaining the reasons for the

transformation of retailing formats therefore remains as “one of the most intriguing and difficult

problems in the marketing discipline” (Markin and Duncan 1981).

The most commonly accepted view on retailing evolution is the “synthesis” by Brown

(1987), which distils the literature into three main approaches to understanding the transformative

process: cyclical, conflict, and environmental. In other words, changes in retail formats are the

outcome of some combination of environmental forces, and a cyclical sequence of institutional

conflicts (Anitsal and Anitsal 2011). This three-variables explanation of retailing evolution has

endured for decades (e.g., Anitsal and Anitsal (2011), Betancourt and Gautschi (1986), Davies (1998),

Evans (2011). Evans, Barnes, and Schlacter (1993), Gist (1968), Levy et al. (2005), Markin and Duncan

(1981), Roth and Klein (1993), and

In marketing’s most recent attempt to explain the evolution of retail formats, the “Big

Middle”, Levy et al. (2005) combine economic with cyclical factors in arguing that the most

successful retailers are - in the long-run - “inexorably drawn” into being volume-driven

generalists. Brown et al. (2005) build on this in their recognition of the influence of technology

and population migration, yet acknowledge the need for further research on environmental

factors. Although the “Big Middle” advances our understanding of retailing change, it is

deterministic and largely based on large-scale retailing experience in the USA. While each of the

schools of thought on retailing provides partial explanations of its development, the types of

independent variables that have been studied make interdisciplinary comparisons difficult. As

shown in the summary of literature in Table 1, the range of independent variables in extant

knowledge extends across disciplines, from the economic costs of exchange, environmental

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influences, individual stores, and their geographic dispersion, to power in relationships in the

distribution channel (Pfeffer and Salancik 1978). Given the difficulty of comparing the

incommensurate variables of the literature, one way of analysing such cross-disciplinary

knowledge is not in terms of final or “ultimate causes” (Schumpeter 1947), but on the basis of

initial governing “first causes”, or fundamental similarities in the assumptions and beliefs about

why change takes place. In other words, researcher’s choices of topics and methods indicate

implicit beliefs about relevance, and therefore also about probable regularities (Hollander 1978).

This review therefore pulls back from a detailed examination of individual schools of

thought, to look at shared primary assumptions that can be discerned from the literature. It takes

a systems theory approach to the literature, in its “search for fundamental quantities and a listing

of parts” (Halliday 1984, p. 135). This is the approach recommended by Boulding (1956, p. 203)

“to look over the empirical universe and to pick out certain general phenomena which are found

in many different disciplines, and to seek to build up general theoretical models relevant to these

phenomena”. Indeed, the different schools of study are not incompatible in an epistemological

sense, and there are many points of crossover between bodies of work.

This meta approach to analysing the literature necessarily involves reductive

generalisations in order to derive the constituent elements of different theories (Brown, 2011).

This reductive process provides a means of making sense of disparate phenomena arising from

different disciplines, and links together bodies of work that, up until now, have remained

conceptually unconnected. This process also necessitates an examination of the historical

development of different bodies of thought, since assessing the validity of existing theories is

difficult unless they are considered within the historical context in which they occurred (Jones

and Shaw 2006). It is only by studying the unfolding of intellectual history, through tracing the

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development of changing areas of interest captured in “old” research, that context-dependence

and the accumulative nature of knowledge become apparent.

This review therefore analyses the wider themes of the cross-discipline literature based

on assumptions made about fundamental “first” causes of change. It is not intended as a

comprehensive account of the literature, but rather presents a birds-eye view on a landscape of

knowledge and its most salient features. This provides a systems theory typology of underlying

causes of retailing change. This typology does not in any way invalidate the contributions of the

numerous and discrete explanations of exchange behaviour. Rather, it provides a framework in

which we can seek to acknowledge - and support or refute - the litany of ideas contained in

extant knowledge, together with their underlying causal themes. Table 1 summarises, in

approximate chronological order of their emergence and development, six broad themes in the

English-language literature on retailing change, where change is assumed, in the first instance, to

take place as a function of:

1. Economic efficiencies

2. Patterns operating in nature

3. Power inequities

4. Innovative behaviour

5. Environmental influences, and

6. Interdependent parts of the system in co-evolution

In the rest of this document, we critically discuss these six themes. These themes are arrayed in

their approximate chronological order of emergence to highlight how later themes were partially

informed by the preceding perspectives.

Insert Table 1 about here

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Change as A Function of Economic Efficiencies

Economic approaches dominated management thinking about distribution for at least the first

half of the twentieth century, reflecting the push for “scientific” management advocated by

Taylor (1947). Early writers included Coase (1937) and Friedman (1953), whose influence

reflected and prolonged the hegemony of economic explanations of exchange behaviour,

although the role of entrepreneurial activities of the managerial team is also acknowledged in

some early economic work (e.g. Nystrom 1930).

Economic approaches focus on both micro and macro structural changes in the

distribution industry and their central concerns include costs, productivity and concentration

(Bucklin 1981, 1983; Mallen 1973; Takeuchi and Bucklin 1977; Tucker 1978). Early work by

Barger (1955) and Cox et al. (1965) provided some insight into how changes in retail structure

influenced retail cost and gross margins. Generally, economic approaches are summed up by

Mallen (1973), who saw total distribution cost efficiency as the reason intermediaries emerge or

disappear - the relevant cut-off points when economies versus diseconomies come into play.

Under this logic, “the basic raison d’être of middlemen is providing external economies to

producer firms” (Mallen 1973, p. 20).

Related to this are studies on horizontal concentration in the industry or changes in the

number or types of intermediaries, such as Tucker (1978), Hall and Knapp’s (1959) survey on

the relation between the number of shops and retailing productivity, or Jefferys’(2011) study of

retailing in Britain from 1850-1950. The impetus for studying horizontal concentration stemmed

from the belief that there were “too many stores” (Ford 1935), an issue which “has been vexing

retailers at least since Adam Smith”. A lack of data, however, meant industry “concern about

over-trading tended to result from value judgements - from the shopkeepers’ sense that

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competition had passed the limits of fairness” (Monod 1996, p. 26-7).

Transaction cost analysis (TCA), extended by Williamson (1975), focussed on how the

role of transaction costs shaped the structure of market relations. Although its original focal unit

was exchange dyads, TCA has been extended in more recent work focussing on the choice of

using local intermediaries versus the establishment of a company’s own market entry channel, in

other words “make or buy” decisions (Anderson and Coughlan 1987).

Another stream of economic explanation is that of the functionalist writers, whose

research concerned the specific utilities of intermediaries, such as Alderson’s (1957) time, place,

and product assortment utilities, or Bucklin’s (1967) list of channel functions: transit, inventory,

search (communication), persuasion, and production. A definitive list of the functions of retailers

is yet to emerge (Nyberg 1998), though standard textbooks suggest anticipating customer wants,

developing assortments of products, storing products, sharing risk, acquiring market

information, and financing and transport. Despite their mechanical nature, functionalist

approaches provide a means for conceptualising channel structure in terms of the patterns of

relationships among organisations and the way the work is divided, and the cost efficiency of

performing each activity (Dixon and Wilkinson 1986).

Economic approaches rely heavily on ceteris paribus assumptions and presume that

equilibrium solutions will prevail. Finally, economic approaches do not explain why

“uneconomic channels” and cost-inefficient retailers persist over time (Filser and McLaughlin

1989), or why retail and wholesaling formats resist change even when it appears to offer

economic benefits.

The unifying characteristic of works in this category is their logical or rational nature.

Their governing assumptions, however, concern the justification of intermediaries, which posits

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economic efficiency as a first cause of change.

Patterns Operating in Nature

The second main explanatory theme in retailing change focuses on patterns operating in nature.

Common to these models is a belief in the presence of repeating phenomena, through either time

and/or space. There are three different emphases in this group: cyclical models, conflict models

and spatial positioning.

Cyclical models propose that retail formats pass through several predictable stages,

before an inevitable decline. Cyclical models include McNair’s wheel of retailing (Brown, et al.

2005), the product or institutional life cycle (Davidson, Bates, and Bass 1976), and the

observations of a general decline during the third generation of family-run businesses

(Dreesmann 1968), prompting the maxim: “from shirtsleeves to shirtsleeves in three generations”

(Lazonick 1994). The wheel of retailing - which predicts a pattern of growth, development,

maturity, and decline - has widespread acceptance in marketing instruction, and in some standard

textbooks, it is the only explanation proffered for retailing change. Although its simplicity is

appealing, the wheel of retailing has limited power in explaining why department (and other)

stores that should (according to its own logic), have been superseded, continue to trade today.

Rather than being a theory of change, the wheel of retailing is perhaps “simply an artifact of a

particular industrial evolutionary stage” (Hollander 1981, p. 89) and does not adequately inform

why format innovations are adopted or disseminated at a sectoral level. Overall, this theoretical

approach presents a questionable explanation of change and has been criticised for lacking

universality, particularly in developing world contexts (Brown 1991; Savitt 1982).

Other cyclical models predict a pendulum-like movement between two ends of a

spectrum (Doody 1963; Savitt 1989). They include the retail accordion, or the general-specific-

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general approach (Brand 1967). This model describes the evolution of distribution formats in a

polar pattern of the number of lines of merchandise handled by the predominant format. An

illustration is the general store of the nineteenth century, which “gave way to the specialist,

single-line businesses of the twentieth, which were themselves superseded by the mass

merchandisers of the post-war era” (Brown 1987, p. 9). The mass merchandiser was followed in

the 1950s, by the advent of business format franchising, when highly specific outlets again

developed. By the end of the twentieth century, the giant superstore had re-emerged, for example

the U.K. 40,000 square feet store offering dry-cleaning, photo-processing, health checks, a

restaurant, crèche, pharmacy, and cut-price petrol (Jones 1998). The polarity of the retailing

sector in terms of small and large entities has been an ongoing theme in the literature

(Palamountain 1955), and more recently, work has been undertaken on the polarisation of

retailing on such variables as service and size (Brown 1987; Monod 1996). Although cyclical in

their rhythmic nature, these polar models can be differentiated from cyclical models such as the

wheel of retailing because they lack the terminality of eventual decline. Instead, they allow for

ongoing oscillation in a given plane of interest, and as such, they move towards a more general

theory of change.

A more analytical class of works based on polar patterns includes conflict models or

dialectic theory. Dialectic theories hold that innovation is brought about when newcomers

challenge, and force change in traditional formats. Change takes place through a process of

Thesis→ Antithesis→ Synthesis→Thesis→

where the established or maturing class of format forms the thesis, and new, innovative formats

the antithesis (Gist 1968). Both types adapt to produce a synthesis or composite institutional

form, which becomes, in turn, the new thesis, and the pattern continues. While this seesaw of

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change and counter change exhibits polarity, dialectic theory diverges from other cyclical models

in its perception of the source of change, the innovator (the firm or its founder), and also because

the nature of change is viewed as a two-way process. Dialectic or conflict models have a good

general fit with historical evidence, and can be applied to a variety of cases of change. Examples

of the phenomenon of synthesis are readily observable. For example, department stores were

challenged by the advent of large discount houses that began to appear in the 1950s (with some

exceptions, e.g., Five and Dime stores were introduced prior to World War 1 in some countries).

By the 1970s, in most Western nations, a new synthesised format, discount department stores,

such as Walmart, had appeared on the landscape, which Lichtenstein (2009) attributed largely to

emerging technologies (e.g., barcodes) and changes in government legislation. Similarly, the

growth of voluntary group trading in the grocery sectors in the 1960s and 1970s throughout the

USA, UK and continental Europe was largely in response to the emergence of supermarket

multiples and direct manufacturer-retailer linkages (Quinn and Leavy 2005). Early conflict or

dialectic models grew out of the work of Nieschlag (Fullerton 1986), and Schumpeter (Bliss

1960). Schumpeter argued that discontinuous change (“change that matters”) happens when

innovators force the existing body of retailers to adapt and imitate. Nieschlag, on the other hand,

believed that the innovators themselves are modified in the process of diffusion of the innovation

(Fullerton 1986). The unifying characteristic of all the literatures above is their teleological

nature, in their shared belief that “there is a grand perpetuity” (Hakansson and Lundgren 1997, p.

19). This gives patterns operating in nature as a fundamental or “first” cause of change.

However, in isolation, such theories provide only limited insight into retail evolution, and

conflict models have been criticised for not fully explaining retail format adaptation. While the

emergence of discount stores in the United States forced some retailers to reposition towards up-

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market stores, other retailers responded by cutting prices or buying out competitors to maintain

their market position (Brown 1987).

Less metaphysical but also concerned with a search for patterns, are the studies on retail

location, which has been explored by researchers from diverse disciplines, although geographers

have made the main contributions (Clarke, Bennison, and Pal 1997; Cohen 1996; Graff 1998).

The central focus of these works is on the patterns of spatial distribution of shops, the associated

patterns of shoppers’ behaviour and store choice (Craig, Ghosh, and McLafferty 1984), and the

implications of these patterns for managerial or urban planners. Ingene and Lusch (1980), for

example, examined geographic market selection for department stores using data from more than

200 United States metropolitan areas in an attempt to predict the potential profitability of specific

markets. More recent scholars such as Coles (1996), in his geo-historical study of German

retailing, found “distinct patterns and processes of retail evolution existed”, while Sparks (1990)

concluded that “spatial and structural change in retailing…clearly… operate in harness”.

Allaway et al. (1994) found that suburban diffusions of innovations “emerge at both predictable

and random locations” which can be influenced by the “purposeful efforts” of the innovator. In

their application in site selection and normative purpose, the works concerning geographical

patterns differ from others in this category. More recent research adopts an ecological

perspective in understanding the spatial fragmentation in retail centres (Rotem-Mindali 2012). In

common with other pattern research, however, is their understanding of evolution as a

fundamentally unstable process of continual flux. This contrasts with the assumptions of

economic theory of “ceteris paribus” and equilibrium in markets.

Power Inequities

The literatures in this category assume that, contrary to economic assumptions, not all behaviour

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is optimal or logical. Rather humans typically act - in the first instance - in their own best

interests, which may or may not coincide with rational expectations (“bounded rationality”). The

unifying assumptions of this group of works are that “the basic variables are social variables”

(Stern and Brown 1969, p. 13, italics in original), and that “economic relations are embedded in

social ones” (Nelson 1995, p. 76).

The growth of interest in behavioural analysis corresponded with a rising discontent with

the dominant economic paradigm (Nyberg 1998). The recognition that manufacturers had lost in

prominence because of the rise of large-scale retailers, was being discussed in academic journals

in the early 1940s (Wingate 1941), and retailers were coming to be seen “as whole individuals

not simply economic agents” (Dixon 2002, p. 741). By the 1950s, the idea of the channel as a

mechanical conduit was giving way to the channel as a set of relationships, or a “behaviour

system” that changes over time (Alderson 1957).

Chandler (1977), Chernatony (1989), and Mallen (1967) described how the role of

“channel captain” shifted over the past two centuries: from the wholesaler in the last half of the

nineteenth century, to the manufacturer because of the Industrial Revolution, and then finally, to

the retailer in the twentieth century. Central to this recognition of the rise of retailers was the

construct of power. The research on power has been “truly inter-disciplinary” stemming from

political theory and philosophy to become “one of the central concepts of the social and human

sciences per se” (Clegg 1989, p. xvii). In marketing, the power literature deals with questions of

evolution only indirectly. That is, it does not seek to explain evolution, but its substance

highlights how distribution channels are shaped by power relationships in the channel, and has

led to research into such behavioural issues as collaborative efforts within the channel and, more

recently, the development of trust (for example, Morgan and Hunt 1994, Palmatier, Dant and

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Grewal 2007, Young and Albaum 2003). Closely related to the research on power was the

construct of conflict. Palamountain (1955) and Mallen (1967) identified the relationships of

retailers with other retailers (“intertype competition”) as the major source of distributive conflict

in channel relationships, and every innovation in retailing has met with resistance, from the anti-

department store, and anti-chain store movements (Hollander 1972-73, p. 13), and resistance to

group trading in numerous wholesale sectors (Quinn and Leavy 2005), to such incremental

changes as the introduction of chromium turnstiles in stores (Kingston 1994).

Although there are difficulties in measuring the constructs of power and conflict, the

inclusion of power in an analysis is of particular importance. Klein (1980) claims that

economists have swept considerations of power under the “ceteris paribus rug” because it does

not fit their paradigm. Instead, they pay heed only to the power differential between firms, and

the typical unit of analysis is usually confined to the manufacturer:retailer dyad (for example,

Chernatony 1989; Krishnan and Soni 1997; Segal-Horn and McGee 1989; Tynan and

Cunningham 1995).

The theory of countervailing power directly addresses the issue of change in its more

general proposition that, the aggregation of power in any part of a system often results in a

corresponding but opposing force in another part of the system (Emerson 1962; Galbraith 1967;

Gaski and Nevin 1985; Polanyi 1975). Galbraith (1967, p. 120) wrote: “power on one side of a

market creates both the need for, and the prospect of reward for the exercise of countervailing

power from the other side. This means that, as a common rule, we can rely on countervailing

power to appear as a curb on economic power”. He predicted in this same 1967 work, the rise of

retailers’ power as a countervailing force against the dominance of manufacturers at that time.

History thus supports Galbraith’s thesis of countervailing power, since retailers have indeed

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taken the dominant position in the channel, driven in large part by the imposition on

manufacturers of trade allowances and “slotting fees” to rent shelf space (Lariviere and

Padmanabhan 1997).

Countervailing power makes explicit the idea of imbalance in relationships as a primary

driver of change. As Segal-Horn and McGee (1989, p. 26) argue: “much of the shift in balance of

power towards retailers has itself been a response to the previous market power of suppliers”.

This brings into focus the idea of relative power and improves on the shortcomings of economic

approaches with their reliance on horizontal or industry-wide competition as the chief regulating

mechanism. In countervailing theory, competition extends both horizontally and vertically or, as

Galbraith predicted (1967, p. 119) “big sellers (manufacturers) cause the rise of big buyers”

(retailers).

If perceived power inequities are a force of change in retailing, then we should expect to

see a backlash against retailers’ current domination of the distribution channel, which has been

evident since at least the 1980s. Since then, however, there have been very few manifestations of

countervailing power against retailers, unless we consider the proposition that the rise of

electronic retailing is being driven, at least in part, by the need to curb the power of store-based

retailers. For manufacturers and suppliers, the Internet presents a means of bypassing retailers

that is, for the first time in the history of direct channels, a viable alternative offering relative and

absolute cost-efficiencies, plus access to a market that spans the globe. Similarly, consumers

boost their relative power whether consciously or not, through the adoption of electronic

commerce, because they multiply the number of alternative suppliers available, as the cost of

“comparison shopping” across the globe approaches zero (Bakos 1991). One could conceivably

argue from the lens of big middle concept - in which successful retailers are “inexorably drawn”

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into being volume-driven generalists - that electronic retailing is the emergent big middle of the

early twenty-first century, as evidenced in such online giants as Amazon and Alibaba.

Countervailing power, in common with the polar models discussed in the last section,

describes a pendulum-like pattern, which views change as a two-step process of action and

reaction. Its underpinning, however, is overtly behavioural in that countervailing power is seen

as a solvent to human tensions, and in some way necessary as a corrective balance or “curing”

power (Boulding 1989). The theory of countervailing power can be applied to a variety of cases

of change, and generally fits well with historical evidence. Wilkinson (1990) points out,

however, that its predictive power is limited in scope. It does not explain the reasons behind the

success or failure of specific retailing formats. Related to this conceptual difficulty is the

question of whether countervailing power is the end product, or merely a stage in a continual

process of change (Hollander 1981, p. 89). That is, if we accept the morphing to form that is

described by dialectic theories, then “original” power is more likely a countervailing response to

some even earlier accumulation of power. In essence, countervailing power is concerned with

relative power in a two-step process of change, but dialectic theory allows for ongoing change,

and so moves towards a metatheory of change.

The contributions of power literature include its recognition of the role of humans as

active agents in shaping exchange behaviour and, therefore, in effecting change over time. The

theory of countervailing power acknowledges change more directly, and makes explicit the

concept of change as a two-way process. The significance of both bodies of work is in their

acknowledgement that power exists in the channel of distribution, and in the shared primary

assumption that change is human-centred. However, as noted earlier it does not explain the

reasons underlying success and failure of specific retailing formats.

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Innovative Behaviour

This literature is the least developed of the six causal streams, even though the role of the

entrepreneur was recognised at least as early as Adam Smith. The focus of innovation literature,

however, centres not so much on conflict and self-interest, which prescribe the power literature,

but on the particular role of innovators, or innovative behaviour in general.

Works in this category include the hagiographies of great stores and their founders.

Americans celebrated department store founders John Wanamaker (Sobel 1974), Marshall Field

(Wendt and Kogan 1952), and Roland H. Macy (Hower 1943), while the British lauded Gordon

Selfridge (Honeycombe 1984), and the founders of Harrods (Callery 1991) and Liberty’s

(Adburgham 1975). These celebratory works provide rich descriptions of the “personalities”

behind department store retailing (Converse 1959), men who were by definition excellent

promoters. Often referred to as “merchant princes”, these department store founders prompted

the remark by economist Alfred Marshall that “in the hands of an exceptional genius (department

stores) sometimes rise with meteor-like rapidity and splendour” (Perkins and Meredith 1996, p.

7). A parallel case can be made for Sam Walton, the founder of Wal-Mart.

The more analytical class of literature on the role of innovators stems from the eighteenth

century writings of Adam Smith. Early works adopted a functionalist approach to entrepreneurs,

similar to the functionalist works written on retailing, which recognised the value of

“entrepreneur-coordinators” in adding “marginal product”, especially in their function as

business forecasters (Coase 1937). The importance of innovators was elevated by Schumpeter

(1947, p. 150), who saw their role as pivotal to change, and synonymous with progress itself.

Schumpeter argued that the “creative response” of innovators (as opposed to the “adaptive”

responses of others) was an “essential element in the historical process… (which) shapes the

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whole course of subsequent events and their ‘long-run’ outcome”. In a similar vein, Aldrich and

Zimmer (1986), and Anitsal and Anitsal (2011) argue that new organisational forms emerge

because of the entrepreneurial activities of new entrants. Some more contemporary examples

would be Ray Kroc (who founded Mc Donald’s in 1955) and James McLamore and David

Edgerton (who launched Burger King in 1954), and triggered the franchising revolution which

catapulted the franchising format as the fastest growing form of retailing in the world (Dant and

Grunhagen 2014; Dant, Grunhagen and Windsperger 2011). Many writers regard

entrepreneurship as a collective activity, which nowadays is subsumed as a part of the corporate

mission. Cole’s “multiple entrepreneur” (Silk and Stern 1963) concerned entrepreneurship as a

corporatised collective function, which Chandler (1961) endorsed and explained as a corollary to

the development of “multi-function enterprise”. The consequence, as Schumpeter pointed out

(1950, p. 132), is that “innovation is itself being reduced to a routine”.

The common emphasis of this category of works is on the importance of the role of

innovators and innovative behaviour in effecting change. This moves beyond the behavioural

locus of “self-interest” that underlies the power literature, to a broader consideration of human

behaviour, in which self-interest may well play a part. The two schools are not incompatible in

an epistemological sense. Recognising the role of innovative behaviour addresses the issue of

change directly. It posits change as an endogenous process, in contrast with the next category of

literature, which looks to external causes.

Environmental Influences

Compared with the literature so far discussed, works in this category are unified by their

tendency to look at change as context-driven, or “at retailing from the outside” (Samson 1981, p.

32). Most works of an historical nature implicitly accept the environment as a first cause of

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change, but have drawn criticism from relying upon anecdotal and not analytical evidence

(Brown 1987). Indeed, one of the characteristics that separates historical research from other

approaches is its broad domain, and attention to the macro factors surrounding the object of study, for

example, Miller’s (1981) history of the world’s first department store, the Bon Marché. In general,

historical works provide rich descriptive narratives of retailing evolution, which pay heed to the

time and space context of change, and its antecedents. While such historical studies promise to

extend our understanding of the environment of retail format evolution, Brown (1987) found

they have limited value in predicting retail trends. The assumption upheld by historical research

is that change cannot be understood outside of its context. While historical works provide the

pedigree for marketing’s long history (for example, McArthur 2013), most extant historical work

does not fully explain the reasons underlying retailing change and evolution. For example, while

Sears and Montgomery Ward mail order trading was successfully adapted to environmental shifts

in the 1920s (e.g., investment in warehousing facilities), many American department stores were

slow to recognise the value in growing suburban locations (Brown 1987; Emmet and Jeuck

1950). So, too, retailers in the United Kingdom have been criticised for somewhat ‘lack-lustre’

responses to environmental changes in the 1970s and 1980s (Brown 1991b).

Another more recently developed body of works also gives primacy to historical context,

but its arguments rest on the epistemological necessity of considering history. There are two

main types of argument central to the claim that history matters. The first concern path-

dependence arguments (David 1994; Hakansson and Lundgren 1997) about the succession or

flow of events, and sunk-cost decisions, such as “lock-in” and the irreversible investments

involved in, say, the choice of competing technologies (Cohen and Stewart 1994; David 1993)

which predicted future events. Path dependence contributes to our understanding of cumulative

20

causation, with the observation that “extraneous features of the initial conditions, the historical

context in which organizations are formed, can become enduring constraints” (David 1994, p.

214). Indeed, in his study of US department stores from 1910-1965, Wood (2011) found “lock-

in” to the traditional downtown locations “posed significant obstacles” to adaptation and

progress, and contributed to their ultimate decline.

The second type of arguments supporting consideration of history concerns behavioural

expectations. These contend that history is important because it contains precedents for

behaviour, which give rise to conventions and expectations of role conformity in relationships

(Hodgson 1998). Habits and expectations are important because deviance from role expectations

can be a significant source of conflict (Rosenberg and Stern 1970), which itself provides impetus

for change.

Another group of works in this category of environmental influences identifies specific

causal variables in the environment. Examples are Gist’s (1968) nomination of demographic,

social, economic, cultural, technological, and consumer character variables, or the PESTLE

framework of political, economic, socio-cultural, technological, legal and environmental

variables. Extensions on PESTLE include Clarke’s (2005) application to international markets,

which adds the variables of history, language, financial, rules, demographic, infrastructure and

culture.

The major significance of these works is their explicit acknowledgment of multiple

influences in the environment, especially consumers as a force of change - a “variable” that until

this point in the development of thought on retailing evolution had been largely dealt with only

indirectly (Buckley 2011). A spattering of literature appeared on “the consumer movement”

following the rise of activist groups in the 1930s, but its focus was largely about consumers as a

21

new organised political entity, or largely as a party to be controlled (Blattberg and Glazer 1994,

Craig-Lees 1991, Dameron 1941). Reynolds et al. (2007) pay heed to the role of consumers in

driving change in retail formats, but fleetingly. More recent work by Bailey et al. (2010)

examines consumer reactions to self-service supermarket formats in England (c. 1947-75)

utlising a ‘life course’ perspective. Such research underscores the importance of recognising that

consumers constitute a fundamental half of the exchange relationship and further research from a

consumer perspective is warranted to address what is a significant structural gap in our

understanding of retailing evolution (Cohen 1990).

Another school of study that places the environment at the centre of change is ecological

theory (Etgar 1984). This approach views change in Darwinian terms of “natural selection

whereby only the fittest retail species survive” (Brown 1987, p. 8), or an evolutionary process in

which firms that do not adapt to their environment struggle and die out (Davies 1998; Levy et al.

2005; Williams 2009). While this idea may be intuitively appealing, ecological theory treats

retailing as “a dependent variable in a world of environmental forces” (Hollander 1981, p. 90),

and so ignores the process of how retail formats - and the inter-relations between retailers and the

environment - are affecting change (Deutsch 2010). To some degree then, ecological theory is

limited by its unidirectional, deterministic and mechanical thinking.

Characteristic of these works is the acknowledgement of the environment, and the

“process” of change over time. While ecological theory represents the most promising of these

attempts at explaining change, the assumption that the environment determines what succeeds,

dismisses the essential principle of co-evolution (i.e., the joint and interactive outcome of

managerial intentionality, organisational efforts and the environmental influences) that underlies

works in the next category.

22

Interdependent Parts of the System in Co-Evolution

This is the most recently developed of the six groups of literature, and like the

historical/environmental stream discussed above, these works concern the “urge to look at

change” (Dosi 1990). Their difference, however, is in their epistemological position, since this

body of work recognises interdependencies between components and two-way processes of co-

evolution. Several theories are linked by this focus on the “wholes” rather than the “parts”, and

the consequent refutation of single-cause arguments because of the implausibility of providing an

“explanation of complex phenomena in terms of isolable elements” (Bertalanffy 1975, p. 151).

These theories are variously known as evolutionary theory, co-evolutionary theory, and more

broadly, systems theory.

Evolutionary theory according to Nelson and Winter (1993, p. 194) is “structurally”

different from orthodox theory, presenting a “way of theorizing rather than an explicit formal

theory… (though) the lines between these are somewhat blurry”. Nelson and Winter assert that

existing “orthodox” theory about change must be “regarded as not merely oversimplified but a

misleading structurally inadequate explanation… (because) important mechanisms are

disregarded or dealt with shallowly”. The authors argue the value of re-specifying extant

knowledge, which is characterised by “little theories aimed at different phenomena”, as “special

cases of a broader ‘master theory’” (1993, p. 194-195). While Nelson and Winter acknowledge

the purposeful behaviour of firms, the emphasis placed on aspects of “selection” in their

evolutionary model on the behaviour of firms and industry response, implies that environments

select organisations (Lewin and Volberda 1999).

Lewin and Volberda (1999) argue for a “co-evolutionary theory”, which “requires that

sets of co-acting organizations and their environments be the object of study”. The authors

23

recommend four criteria for the co-evolutionary approach: studying organisations over a long

period, examining organisations within a historical context of the firm and its environment,

considering multidirectional causalities between micro and macro evolution, and the study of the

interactions between multiple nested levels of co-evolution. These co-evolutionary criteria are

well attended by systems theory.

Systems theory contends that any object of study cannot be fully understood outside the

context of the co-evolution of the economic, social and political systems of which it is a part

(Wilkinson 1990). In this approach, the object of study (the system), is viewed as embedded in a

much larger system (the suprasystem), that is itself subject to complex change. In turn, the

system comprises smaller subsystems from which it is aggregated, and which influence and

proscribe the limits of its operations. This three-tiered set of relationships, in turn, must be

understood in the context of the environment, and its physical and cultural parameters.

Systems theory recognises that retailing evolution must be both context and path

dependent. History is important, because the “dynamics of a system are not only governed by

where it is, but also by where it is coming from” (Hakansson and Lundgren 1997, p, 128). Local

context is also important, because the terrain on which development takes place can be very

uneven (Boulding 1981). Systems theory therefore provides for heterogeneity in both outcomes

and initial states, which is absent from the more deterministic and monocultural literature thus

far discussed. In its epistemological aim to provide a “way of seeing things which were

previously overlooked or bypassed” (Bertalanffy 1975), systems theory also provides a structure

that is “openly interdisciplinary in recognising insights” from a range of sciences (Hodgson

1998, p. 173).

As yet, this theoretical approach has not been applied to the topic of retailing evolution,

24

except by Evans, Barnes, and Schlacter (1993) whose work considers only the cyclical, conflict

and environmental literatures discussed earlier, but ignores the contributions from other

disciplines. Layton’s 2011 work examines the characteristics of marketing in general, which

allow it to be viewed as a system, and suggests, among other propositions, that “persistent

discrepancy in marketing systems is a driver of innovation” (Layton 2011, p. 263).

The systems theory approach addresses the main problem of conventional theory in

which “the broader conceptualization tends to be implicit and ad hoc, rather than explicit and

systematic, (and in which) a number of important issues tend to be neglected” (Nelson and

Winter 1993, p. 197). That is, compared with the adoption of a particular approach in the pursuit

of further knowledge, systems theory controls for “error” in knowledge development, by making

explicit the ways in which single-cause arguments are invalid.

While their emphases may differ, evolutionary, co-evolutionary and systems theory agree

on the basic or holistic system viewpoint, and reach similar conclusions. Their differences then

are largely semantic. Indeed, Bertalanffy introduced the term ‘general system theory’

“deliberately in a catholic sense… So the name, ‘general system theory’ may be used broadly,

similar to our speaking of the ‘theory of evolution’ which comprises about everything between

fossil digging, anatomy and the mathematical theory of selection… It is the introduction of a new

paradigm that matters” (1975, p. 157). The significance of these works is their recognition of the

interdependent and two-way process of evolution.

The main value of systems theory lies in its broad scope. This has particular merit in the

discipline of marketing, since “too much research in marketing concentrates on a major variable

without regard to the grand flow of events… The major variables are never placed in the context

in which they arise nor are they considered as to whether they are part of one or more ongoing

25

processes” (Savitt 1988). Similarly, Dixon and Wilkinson (1985, p. 62) point out that standard

texts deal “solely with marketing management, or… the management of a small system”.

A meta perspective, therefore, provides an “alternative paradigm” for current-day readers

in understanding and planning for the future - a view of change in a broader context, and as part

of an ever-changing environment. This extends and anchors the microeconomic nature of

knowledge in marketing, and provides a more useful approach for managers. As Layton (2011, p.

274) writes: “developing a theory of marketing systems may be an essential step to widening and

deepening the scope of marketing thought, offering new horizons for our discipline”.

Discussion and Conclusions

When we look at the development of knowledge in its approximate chronological order, it can be

observed that our understanding of retailing evolution has grown slowly, and is accumulative and

both context and path-dependent. That is, to the extent that theory embodies empirical evidence,

schools of thought develop in their own cultural and historical contexts and are influenced by

local circumstances, habits, and attitudes (Coats 1976). The different “world views” (Bertalanffy

1975) that have evolved to explain exchange behaviour were products of their time and place,

and the body of ideas that purports to explain retail evolution is in itself path dependent.

In the early twentieth century, the capacity and efficiency of manufacturing industries for

handling an unprecedented flow of goods dominated contemporary thought. This was reflected

in the growth of academic interest in the mechanical and rational science of “Taylorism”, with

little thought being given to the “social” tasks of exchange that are performed by retailers. In the

post-war 1920s, when supplies of goods around the Western world became plentiful, a more

humanistic conception of the distribution channel began to take hold. Attention shifted towards

the demand end of the channel - as captured in the emergence of the “customer is king”

26

philosophy. The comparatively sophisticated shopper of the 1920s “was no longer ‘a searcher but

a chooser’, more prone to exercise independent judgment than simply to accept what stores

featured… The balance of power between retailer and customer had shifted in a most disturbing

way” (Benson 1986, p. 102). The corollary of this was the idea that retailers - and not

manufacturers - occupied the cardinal position in the channel, because of their proximity to the

consumer, and their concomitant role in influencing the consumer’s purchase decision.

By at least the 1950s, the prominence and power of manufacturers had fallen, in the face

of the rise of large volume retailing intermediaries (Bucklin 1973), and a body of academic

research on the significance of power relations had appeared. The concept of power inequities

continues to be a central focus of research in the discipline of marketing, although its role in

shaping change has been addressed only indirectly.

These bodies of knowledge that evolved over the twentieth century were typified by a

neglect to explain the historical and cultural contexts under which their findings were made

(Savitt 1988). This lack of attention to the influence of context may explain why the Western

literature on retailing evolution falls short in its application to other nations (Davis and North

1971). Extant literature fails to explain why department stores did not take off in Eastern

European countries (Pasdermadjian 1954, p. 7), or in much of Latin America (Rassuli and

Hollander 1986, p. 9). In addition, most theories were developed largely without reference to

other competing theories. This review has revealed significant overlap and thematic similarities

across different disciplines.

Evolution in retailing entailed a compound of macro and micro influences and a process

of co-evolution. The “causal variables” are multiple, and evolving, and the links between them

are complex. If we look at the fundamental assumptions and beliefs that underpin the literature,

27

however, we can combine extant knowledge, despite its seemingly incompatible focal units.

This review provides a systems analysis of the underlying “causes” of retailing evolution,

as proposed by leading scholars from multiple disciplines. While showing some fit with neo-

institutional economic approaches to explaining retail evolution (North 1990), it does not attempt

to develop a theory to explain retail evolution, but rather to recombine extant bodies of work that

previously had remained conceptually unconnected. It presents a systematic typology of the

cross-discipline corpus of literature according - not to final or “ultimate” causes but - to “first

cause” arguments, or broad governing assumptions about change in retailing. By taking this

macro perspective, we are better able to appreciate the many parts and purposes of extant

knowledge, at least in English-language literature, and rather than assuming a default

methodology, to not take for granted the supremacy of a particular theoretic point of view. This

article argues that evolution in retailing cannot be properly understood outside of the historical,

physical, and social environments in which it takes place, and without considering the

interrelated systems of which it is a part. The methodology of a systems approach, and the

content it yields, thus provides a broader and deeper understanding of retail evolution, in its ever-

changing environment.

Six broad causal themes were identified in the extant literature on retailing evolution,

wherein change is assumed to take place primarily as a function of economic efficiencies,

patterns operating in nature, power inequities, innovative behaviour, environmental influences,

and interdependent parts of the system in co-evolution. First, regarding economic approaches to

explaining change, this review acknowledged their usefulness in providing a priori frameworks

that explain why intermediaries appear in a channel, and in predicting the number of levels to be

expected in a channel. Given the static assumptions and shortcomings of economic explanations

28

in explaining “uneconomic” behaviour, however, this review concurs with Stern and Brown’s

assertion (1969, p. 13) that “the basic variables are social variables”. The economic tasks

imposed on retailers by suppliers are just one subset of the “demand function”, and the behaviour

and goals of actors are governed by more than merely functional considerations of costs, prices,

and demand. Economic efficiency plays a role as a driver of change, but it leaves a great deal of

change in retailing unexplained.

The second causal theme covers works bound by a shared faith, explicit or otherwise, in

the existence of generalisable patterns in nature. Such patterns were discussed as cyclic or

circular, polar or pendulum-like, and locational or geographic. Circumstantial evidence points to

the existence of repeating patterns in a wide range of spheres (for example, Kondratieff 1950;

Zarnowitz 1992), but inconclusively so. Schumpeter (1939) drew from history several

synchronous waves that he attempted to crystallise in a scientifically predictive theory, although why

it was possible to count off these cycles was “indeed difficult to see”. The general pattern of rise and

fall, however, is repeated in the rhythmic tendencies to equilibrium in economic theory, and also

in the dialectics of conflict models and countervailing power, in which seesaw patterns of

tradeoff in the relative power of actors are observed. The persistence of claims for patterns in

nature is notable, but seeking proof of their existence is outside the scope of this review.

Ultimately, such patterns may be more useful in a predictive, rather than explanatory way.

Setting aside the possibility of a grand expository pattern as the entire explanation for retail

evolution, we are left with causalities that are essentially environmental, or behavioural, or which

recognise the interdependency of multiple factors that are co-evolving. There is much evidence to

support environmental explanations of the evolution of retailing. Indeed, the rapid changes that

took place in retailing in Western markets in the late nineteenth and early twentieth century could

29

be described almost entirely in terms of environmental influences. The expanding markets of the

Industrial Revolution created the need for a distribution system much more efficient than that

offered by small stores, fairs, and markets. Department stores back then had better environmental

“fitness” than their competitors, although today they seem unfit and corpulent, and heading

towards demise. Chain stores also were better adapted to the environment of the late 1920s,

because they offered “low” prices at a time of steep inflation after World War 1, and located

outside the rising rents of downtown city sites (where department stores congregated), moving out

to the suburbs where land was cheap, and the population was growing.

Overall, historical evidence suggests that different kinds of environments yield different

outcomes, and rates of change, and other factors must be taken into account. In Australia, for

example, chain stores had emerged in Melbourne by 1914, but it was not until 1928 that they

became viable in its largest city, Sydney, because of the dominance of Sydney department stores,

which were among the most powerful firms in the country (McArthur 2005). Environmental

theory is thus limited in its global applicability and, related to this, in its omission of the

influence of retail formats on their environments, yet historians such as Leach (1993) and others

illuminate the indelible impact of retail stores on their environments and indeed, on our culture

of consumption.

This review reveals that most research assumes that phenomena can be studied as if they

were disembodied from their environment. With its concentration on single variables, or small

groups of variables at best, marketing atomises social phenomena with the result that the

discipline presents as a “string of studies” (Savitt 1988, p. 127). In essence, the ahistorical

assumptions and “closed system” thinking of single-cause theories are epistemologically

indefensible. Instead, we need a meta and open system approach that takes in the panorama of

30

knowledge over time. For managers and for scholars, this means taking a holistic approach that

rejects deterministic truths, recognises ambiguity, and accepts that history and context matter.

Finally, if we accept a systems philosophy, we need to allow for causes that have not yet been

identified, or accepted, in mainstream literature. The role of consumers in influencing the path of

change, and the influence of retail stores on their environments, are two probable causes of retail

evolution that deserve further study.

Moreover, the application of this framework in developing countries could prove

beneficial in extending prior evolutionary perspectives in these localities (e.g. Goldman 2000,

2001; Goldman and Hino 2005). Precisely because the contextual realities and the experiential

socioeconomic history of developing economies differ dramatically from the foregoing Western-

centric historical evolutionary account of retailing, we need to embrace the systems theory

perspective. Unique among the six perspectives presented in the above narrative, only the

systems theory clearly embraces and endorses the premise that multivariate causation must be

kept in central focus when developing any encompassing evolutionary account of retailing, and

as such would be fully accommodating and accepting of novel contingencies that would no doubt

be revealed when investigating the retailing trajectories of developing economies from an emic

perspective.

31

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Table 1: Summary of Primary “Causes” and Assumptions about Retailing Evolution in the Literature

Change occurs primarily as a

function of

Bodies of literature Typical focal units Contributions Limitations

ECONOMIC EFFICIENCIES • Microeconomic theories Intermediaries Institutions emerge (disappear)

because of economic

(in)efficiencies.

Static ceteris paribus

assumptions; cannot explain

“cost-inefficient” institutions, nor

suboptimal behaviour.

• Transaction Cost Analysis Transaction costs

• Functionalists Utilities

PATTERNS OPERATING IN

NATURE • Wheel of retailing

Evolution is a fundamentally

unstable - but rhythmic – process.

Determinism implied by patterns.

Inability to explain the continued

existence of formats that should,

according to their own logic, have

been superseded.

• Accordion of retailing Retail formats

• Retail Life Cycle Individual institutions

• Conflict models and dialectic

theory

Opposing parties

• Geographic theory Geographic dispersion of stores Understanding of spatial

distribution of shops in

geographic context.

Mainly normative research with

implications for urban and other

managerial planning.

POWER INEQUITIES • Power literature

Dyads (manufacturer: retailer) Change is human-centred and

primarily behavioural.

Reification of power despite

“enormous difficulties” in its

measurement. Dyadic scope deals

with evolution only indirectly.

• Countervailing power Opposing parties Change is a two-step process

prompted by perceived power

inequities.

Limited predictive power, and

ignores variables other than

power.

49

INNOVATIVE BEHAVIOUR • Individual store histories

Individuals institutions and

their founders

Rich descriptions and visual

evidence of stores.

Hagiographies; single successful

institutions and/or their founders.

• Entrepreneurial literature Innovators or innovative

behaviour

Addresses the issue of change

directly; offers a broader analysis

of how human behaviour affects

change beyond the motive of

power.

Focuses on change agents to the

exclusion of other possible causal

variables...

ENVIRONMENTAL

INFLUENCES • Historical works

External context

Change cannot be understood

outside of its context; cumulative

causation must be considered;

marketing has a long pedigree.

Narrative rather than theoretical;

special-purpose histories that

concern unique events.

• Ecological theory General environmental

characteristics

Specific variables

Exogenous forces affect

evolution, and change is a

“process”.

There are multiple environmental

influences, including consumers.

Overlooks the principle of co-

evolution and how institutions,

and the inter-relations between

institutions and the environment,

are effecting change.

INTERDEPENDENT PARTS IN

CO-EVOLUTION • Systems theory Sets of relationships in their

environmental context

Allows cross-discipline

viewpoints, heterogeneity in

outcomes and initial conditions,

and two-way processes of co-

evolution.

Assumes all components are

knowable. Inability to extract

“universal” truths because of

context dependence.

• Evolutionary theory

• Co-evolutionary theory